'Cobra bite' buying opportunity; buy all top 3: Tulsian

After the expose in respect to Axis Bank, HDFC Bank and ICICI Bank, SP Tulsian of sptulsian.com takes this as a buying opportunity for all three stocks. He told CNBC-TV18 that although the Bank Nifty has been spoiled because of the bad performance, but all the PSU bank stocks have been ruling reasonably well.

After the expose in respect to Axis Bank, HDFC Bank and ICICI Bank, SP Tulsian of sptulsian.com takes this as a buying opportunity for all three stocks. He told CNBC-TV18 that although the Bank Nifty has been spoiled because of the bad performance, but all the PSU bank stocks have been ruling reasonably well.

SP Tulsian of sptulsian.com believes the Cobrapost expose provides a good buying opportunity in Axis Bank , HDFC Bank and ICICI Bank . He says although the Bank Nifty has been spoiled because of the bad performance, all the PSU bank stocks have been ruling reasonably well. "I am keeping a correction of these three stocks as an entry point for the investors", he told CNBC-TV18.

Besides banks, he feels, Jubilant FoodWorks is an excellent stock for traders, but investors shouldn’t make an entry into it.

In the auto sector Tulsian picked Bajaj Auto . It seems to have bottomed out, but according to him, it is better compared to other two wheelers. In pharmaceutical space he suggested focus on the larger stocks. "I will rather be comfortable going for the stocks like Glenmark pharma , Wockhardt , Lupin or Ranbaxy ", he added.

Below is the verbatim transcript of his interview to CNBC-TV18

Q: What did you make of the subscription that Nalco has got and now where do you see the price head?

A: They have really spoiled the way offer for sale (OFS) has been structured. I am not worried about the response to the subscription. Let us understand that 10 percent is the intent of the government to divest. We are only talking of the five percent. They have broken it in five percent.

So, we have received the response 74 percent of that five percent. I don’t understand the logic of divesting or reducing the stake at Rs 40, when the company is having cash balance. On December 31, company has cash equivalent of Rs 5000 crore, which translates into Rs 20 per share.

Since, government is holding 87 percent, they could have very well declared a dividend of at least Rs 10 or may be Rs 12 per share, if not Rs 20. It could have taken the money closer to about Rs 2500 crore in the form of dividend. This is a debt free company. I am not going into the product profile and the structuring of the company because as such for last three quarters or may be for last one year the companies Aluminum that is the smelter business and the power division has not been doing too well.

That has been the general phenomenon. So, if once performance is so bad and poor one should not identified that company for reduction of stake. The company has Rs 5000 crore and one is struggling to mobilise Rs 500 crore, even if this OFS goes through, government will only be getting Rs 500 crore. What is the idea of reducing the stake from 87 percent to 82 percent? So, the structuring and the theme of this OFS was itself ill conceived and I don’t see any logic and rationale behind this.

Q: What happened to SREI Infrastructure ? That stock was holding up fine and is now down 17 percent odd?

A: It may be something to do with the Kingfisher Airlines (KFA) or United Spirits shares. They have been holding this because the company was talking of divesting or selling the stake and realising their Rs 430 crore debt, which they have bought from ICICI Bank. So, may be some problem must have come there either in respect to the ownership or in respect to the security.

I am unable to connect the reason for this fall. However, a wild guess could be only because of that and I wish that other things should not get cropped up for the company. Sometimes this company does come into controversy and one has some kind of apprehensions starting to come in, in respect to this company frequently.

Q: On HDFC Bank , that brokerage Goldman Sachs which has come out with a target price of around Rs 550-570, would you give it any credence or do you expect the downtick that we have seen on HDFC Bank to be a buying opportunity?

A: I take this as a buying opportunity for all three stocks. After the expose, which we have seen in respect to three banks, Axis Bank, HDFC Bank and ICICI Bank, I do not think that the target of Rs 560 for HDFC Bank is likely as given by the Goldman Sachs. I will be using this as a buying opportunity for all three stocks.

The investigations have all started by the Reserve Bank of India (RBI) and government, but that is bound to happen. I am not saying that there will not be any finding in that respect, but it maybe a one or two cases happened at the officer’s level.

That cannot have any kind of apprehensions on the corporate governance or the working of these three banks. In fact the Bank Nifty has been spoiled because of the bad performance of all these private sector banks. All the PSU bank stocks have been ruling reasonably well. That could be with a mild positive bias of about 1-2 percent. So, I am keeping a correction of these three stocks as an entry point for the investors.